California Likely To See $5B in Extra Revenue for January, LAO Finds
California likely will collect $5 billion more in January income tax revenue than forecasters initially expected, according to the Legislative Analyst's Office, the Sacramento Bee's "Capitol Alert" reports (Yamamura, "Capitol Alert," Sacramento Bee, 1/30).
Last week, LAO said that January revenue would be $4 billion higher than initially expected, the largest one-month overage in recent memory (California Healthline, 1/23).
Details of New Projection
LAO raised its estimate by $1 billion based on:
- More than $500 million in extra tax withholding; and
- Fewer income tax refunds paid out by the state.
Factors in Revenue Boost
LAO said that three factors could be contributing to higher-than-expected January income tax revenue:
- The prospect of higher 2013 federal tax rates prompted high-income earners to take more capital gains and dividends in 2012;
- A retroactive state income tax increase might have prompted high-income earners to pay their state taxes earlier than expected; and
- Improvements in the economy have surpassed fiscal experts' expectations ("Capitol Alert," Sacramento Bee, 1/30).
Potential Uses for Extra Funding
Legislative Democrats have said that the state should use any extra revenue to increase spending on health and welfare programs.
Senate President Pro Tempore Darrell Steinberg (D-Sacramento) has said that any extra money the state receives could be used to:
- Pay off debts;
- Expand certain state programs; and
- Boost the state's rainy-day fund.
Steinberg also has talked about using extra revenue to restore dental benefits for low-income adults, which were eliminated under cost-cutting strategies.
However, Steinberg said that lawmakers should be "relatively cautious" about the extra money "until we get more information" (California Healthline, 1/23).In his State of the State address last week, Gov. Jerry Brown (D) called for state officials to practice fiscal discipline by using any extra funds to pay down debt and boost reserves instead of restoring funds to social programs (California Healthline, 1/25). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.