State finances slip in September; could signal new cuts

Revenues came in $301.6 million below projections - bad news because September is normally a large revenue month. That means year-to-date general fund revenues are $705.5 million below budget estimates. From State Controller's press release:

"For better or worse, the potential for revenue shortfalls is precisely why the Governor and Legislature included trigger cuts in this year's State spending plan," said State Controller John Chiang. "September's revenues alone do not guarantee that triggers will be pulled. But as the largest revenue month before December, these numbers do not paint a hopeful picture."

Backstory: State lawmakers, desperate to pass a budget bill last June, pulled a fast one by "assuming" that tax revenues would come in way, way higher than expected this year - $4 billion worth. It was an absurd assumption, but it was the only way the numbers would balance out without instituting another few billion dollars worth of cuts - and no one had the stomach for that. As it turns out, revenues haven't fallen off a cliff (August was pretty good), but they're not nearly high enough to cover the $4 billion. If the target can't be reached by the end of the year, officials will be obligated to trim the budget by an additional $2.5 billion - and those cuts would be especially brutal, directed at K-12 schools, higher education, public safety and social services. As for September, the controller's office summarizes:

This month's revenue figures demonstrate just how volatile the recovery has been to date. Personal income taxes posted solid gains in September, driven in large part by total personal income which has finally exceeded its prerecession peaks according to data from the Bureau of Economic Analysis. However, both sales and corporate taxes disappointed. Particularly troubling is the weak sales tax figures because up to September, they had been tracking above the Department of Finance's most recent estimates.