Don’t Panic About News Stories on State Cash Flows

You may see some headlines about revenues falling short ofexpectations for the first six months of the fiscal year, based on the statecontroller’s latest statement.  The legislature assumed phantom money in June so it could pass a budget moreor less on time.  Now, however, all of the major taxes are performing within a marginof error relative to estimates made in connection with the latest budget proposal.  Forecasting is not an exact science, even when done without phantoms. Spendingis also running about as now forecast.

The real problem the state faces is that revenues are short oflast year’s total due to the expiration of the temporary tax increases.  The drop for the first half of the year isover $4 billion relative to the same time period this year.  But, of course, the taxexpirations were known when the estimates were made.  So that drop is not a surprise - but it is a problem.

The actual report of the state controller is at http://sco.ca.gov/Files-ARD/CASH/fy1112_dec.pdf

There are other things to be scared of: