April income taxes $691 million under forecast

For 2023-24 to date, tax agency-reported income taxes are $5.5 billion under forecast

Corporate Income Taxes Fell Short in April. According to preliminary tax agency data, California net personal income tax (PIT) collections in April were just $137 million (0.8%) below the administration’s monthly forecast, while net corporation tax (CT) collections were $554 million (11.7%) below the monthly forecast.

2023-24 Year-to-Date Revenue Shortfall Now Likely Over $6 Billion. Due largely to substantial PIT shortfalls in December 2023 and January 2024, 2023-24 fiscal year-to-date income tax collections (net PIT and CT combined) are now $5.5 billion (4.1%) below the Governor’s Budget forecast through the end of April. As of the end of March, General Fund sales taxes were an additional $1 billion (3.8%) below the fiscal year-to-date forecast.

Upcoming Budget Events. The administration will update the revenue forecast for the upcoming May Revision, to be released by the Governor on or before Tuesday, May 14. It is virtually certain that revenue estimates will be lowered from levels included in the January 10 Governor’s budget proposal. Recent “early action” on the budget reduced the projected deficit substantially—under one method of deficit calculation, from $38 billion in the Governor’s January plan to perhaps about $8 billion. Lower revenue estimates obviously would increase that deficit, and accordingly, the Governor will have to propose more budget-balancing options, including cuts of one-time and ongoing funding. Revenue forecast reductions also typically reduce the Proposition 98 minimum funding guarantee for schools and community colleges. The Assembly and Senate must pass a balanced budget bill on or before Saturday, June 15, which the Governor must sign or veto by Thursday, June 27, at the latest. The 2024-25 fiscal year begins on Monday, July 1.

Recent LAO Revenue Update. The April figures are consistent with monthly and year-to-date collection data mentioned in the Legislative Analyst’s Office (LAO) recent revenue update (including the LAO update on PIT withholding). PIT withholding for the fiscal year to date is up 5.0% from the prior fiscal year at this point. The LAO increased its revenue estimates for the “budget window” (the 2022-23 through 2024-25 fiscal years) by several billion dollars, although they remain much lower than the Governor’s January revenue estimates for that period. Note that the annual budget act typically reflects the administration’s May Revision revenue forecast.