Soft Spot in State Receipts

The latest cash report from the state controller continues to show a soft spot in state fiscal affairs. State general fund revenues through January are up about 11% over the same period last year, which is good news for the budget.  But the increase is concentrated in income taxes (very sensitive to financial market gains and to the income variations of the upper bracket taxpayers). Income taxes were up 12%. Corporate profits tax receipts were up over 47%. 

Sales tax receipts, which reflect consumption of more ordinary folks, were up only around 2%. The cash report indicates there was an accident of timing that understated normal sales tax revenues. But even adjusting for that event will give you an estimate of under 5%. With population gains of around 1% and inflation around 2%, that number produces a real per capita gain of around 2% - not terrible - but not a booming result either. Although there is nothing on the immediate horizon in the way of bad economic news, we remain in a position where any economic setback could upset the state budget situation.