The State of California’s wallet is a bit lighter than expected—to the tune of about $26 billion.
That’s how much budget revenue failed to materialize by the end of the 2022-2023 fiscal year, according to the state Legislative Analyst’s Office. A big reason the budget outlook missed the mark was due to the 2023 tax deadline being postponed to November—and “postponed payments came in much weaker than anticipated,” the LAO reported last week.
“With the recent receipt of various postponed tax payments, the impact of recent economic weakness and last year’s financial market distress on state revenues has become clearer,” said LAO officials.
Adding to the budget discrepancy, the portion of income taxes collected directly from workers’ paychecks was down 2% compared to the preceding year. And despite above-average growth in consumer prices, sales tax collections were essentially flat.
“The full extent of revenue weakness, however, came into full focus recently with the arrival of the postponed tax payments,” according to LAO officials, who reported total income tax collections were down 25% in 2022-23.
North Bay state Sen. Bill Dodd described the updated revenue forecast as “gloomy.”
“While there’s always room for improvement, we’ve made prudent investments in rainy day funds and debt reduction to better enable us to meet budget challenges than ever before,” said Dodd, D-Napa, adding that his priorities will remain on supporting critical services and investments.
The LAO expects to soon release an updated fiscal outlook, which will examine the ramifications of the revenue shortfall.
Visit lao.ca.gov/LAOEconTax.
